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Goldrunner: Martin Armstrong vs. His Model vs. Fractal Gold

By: Goldrunner (with Lorimer Wilson)

Martin Armstrong has stated his expectations for Gold and the PM Sector to fall into the June period and to continue to correct into October based on his Economic Confidence Model. The fractal work that I do off of the 70’s Precious Metals Bull market and other areas of the charts does not agree with his expectations. Thus, in this writing I take a look at how the Precious Metals Sector has performed in reference to Mr. Armstrong’s Model “bottoms” themselves.

In this article I am using the unorthodox approach of providing the conclusions of the editorial at the beginning to help the reader grasp the issues at hand.


  1. Mr. Armstrong’s suggestion that Gold will trade down into his Model’s bottom into mid-May does not appear to fit the price movements for Gold, Silver or the HUI Index into the last two cycle bottoms on his Model.
  2. Based on the chart, it appears that although the Confidence Model might be effective in reflecting confidence or lack of confidence in the Economy, it fails to reflect the resultant effect of Dollar Inflation on the Precious Metals Sector’s price movements. Thus, as Dollar Inflation is applied to counteract economic weakness, the Dollar Devaluation drives the prices of the PM Sector higher into the “Economic Confidence Low” as represented by the Model’s “bottom.” I would expect this phenomenon to increase since Competitive Currency Devaluations are, in effect, potentially magnifying the rise in Gold, Silver, and the PM stocks due to world-wide paper currency inflation at this point in the cycle. That would match what we saw in the late 70’s parabolic move, and in the Fractal PM Sector moves in early 2002 and into early 2006.
  3. A further sideways move in Gold into October seems counter-intuitive considering the metrics which create the Gold Parabola. As Jim Sinclair has described in the past, a parabola is a mathematical equation of price movement accelerating versus time as price rises. The parabolic movement in the Gold Bull is thus a reflection of the collective investor psychology as the point of recognition of the different forms of inflation at hand becomes recognized by more people as time goes on at an accelerating rate.
  4. Cycles which reflect tops or bottoms do not provide information on the relative relationships to other tops and bottoms as they could be either higher or lower than previous tops or bottoms.
  5. The fundamental driver of $Gold is Dollar Inflation creating Dollar Devaluation. Those fundamentals suggest a rise in the PM Sector into the period of May/ June when QE II is scheduled to end. If so, after a correction of some period of time (my expectation is around 5 to 6 months duration), the Precious Metals Sector would likely again rise sharply based on the already announced fundamental Dollar Inflation needs that will have to be accommodated into late 2012 - and it will likely be a doozy of a move for the PM Sector. This “5 to 6 months out” for the next parabolic rise to begin after the next intermediate term correction, should that intermediate-term correction start in the May/ June period, would match Mr. Armstrong’s expectation for a “cycle bottom” to come in during the 4th quarter of 2011.

Mr. Armstrong’s Expectations

Mr. Armstrong’s recent writings have suggested that Gold will trade down into the bottom of his Economic Confidence Model that arrives in mid-May, stated as “2011.45” on the Model. In the first referenced writings Armstrong said:

“There is also talk about how gold is really a hedge against inflation, but it rallied only because it became a brief hedge against collapse.” “This is just gibberish.” “Gold has NEVER been a hedge against inflation for it if was, then it should be right now several thousand dollars.”

“We could see a low into April/ May, a rebound into June, a retest of the low or new low in October, and then a rally resuming at that period into 2015.75.”

In the second referenced writings Armstrong went on to say:

“So, what does this coming LOW on the Economic Confidence Model actually mean?”

“It does not seem likely that we will blast out of the top of this PRIMARY CHANNEL jumping [to] 1700 and falling back…..just yet.”

“………….a retest of the 1045-1032 area would probably be a buying opportunity, yet that may come a bit higher at the 1100 level.”

“Ideally, a December high (2010) should be followed by a sideways to lower trend into June with March being a key target.”

From the above quotes I can only discern that Mr. Armstrong is expecting Gold to trade down into his mid-May Economic Confidence Model’s bottom. First, let’s take a look at the Economic Confidence Model, itself.


To more easily see the past relationships between Armstrong’s Model bottoms and how the Precious Metals Sector ultimately faired in relationship to them, I have plotted the Model bottoms on a chart (see below) with the Model bottoms denoted by a vertical red line per the chart above as 2006.075, 2008.25, and the one to come at 2011.45. When I created the chart on 02-05-11, I also included a vertical green line to denote the spot before each Model bottom corresponding to today~ 3.25 months before each bottom.

The chart shows that Gold and the HUI Index rallied up into each of the last two Model bottoms. In fact, in both previous periods Gold and the HUI Index rallied sharply from about 3.25 months before the Model bottom into the Red line. These findings do not seem to jive with Mr. Armstrong’s comments as quoted above. Thus, it is my opinion that the potential for Gold, Silver, and the HUI Index to again rally sharply up into the coming May/ June Economic Confidence Model bottom is very high - this also matching my expectations based on the fractal work.


Mr Armstrong’s Opinions On Gold

Mr. Armstrong is looking for Gold to fall into his model’s bottom into mid-May. He also is quoted above as saying that Gold is not a hedge against inflation - that it is only a hedge against collapse. I don’t understand – or agree - with that.

At this time of massive Dollar inflation and Dollar Devaluation the $Gold chart, which is a simple ratio of Gold to the US Dollar, is rising in a parabola. Is that ratio rising ONLY as a hedge against collapse? Did Gold and the same ratio go parabolic in a similar way in the late 70’s “as only a hedge against collapse?” I don’t think so.

I think that Gold goes parabolic in periods of time when people lose trust in paper money - when paper currencies are being devalued - whether or not some sort of collapse eventually occurs. Gold rises against the falling value of the paper currencies being printed because Gold is denominated in paper currency. People buy Gold as a hedge to protect their hard earned savings that are denominated in those inflated paper Dollars against both losses in the currency, and against the losses from the eventual effect that price inflation brings with it.

The Bottom Line As I See It

The above being the case, I think it makes sense that Gold will continue to rise into the Model’s bottom which, coincidentally, falls almost exactly at the announced end of this round of Dollar Inflation via the QE II program that is in progress till June, 2011. Since the 05/ 06 period is the correct fractal comparison to the current time-frame I suspect that a similar price pattern will likely play out into June for Gold, for Silver, and for the PM stocks. This is very similar to how things traded at the similar point in the late 70’s, also. Of course, nobody knows for sure, and that is what makes a market.

I do not foresee a sideways move of some sort for the Precious Metals Sector from now into October because it just does not fit with the parabolic form of the charts. Rather, I am looking for a big move in Gold and in Silver, both now, and again into late 2012. For further basics on what I see for gold please read my very recent editorial here.

For the moment…………………Goldrunner


Goldrunner has also posted this article on the public side of which will soon be a subscription website. (Please note that the subscription button on the site is not active at this time.) To be informed as to when the subscription service is available please contact GOLDRUNNER44@AOL.COM Lorimer Wilson is the Editor-in-Chief of and and will soon be offering a FREE weekly “Top 100 Stock Market, Asset Ratio & Economic Indicators in Review”. To sign up contact him at .

Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. In the interest of full disclosure, GOLDRUNNER is personally invested in the Precious Metals sector including various Precious Metals and other individual stocks. GOLDRUNNER reserves the right to modify or eliminate any or all positions at any point in time.

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